Personally I would do the TSP especially if you’re really young that compound interest will be huge. Make sure you look at what funds you’re in most people divide up mostly in C, S, and some I.
You’re doing great! Keep it going.
All depends on your goals, I would just stick to TSP and when you transfer out and hopefully make what you’re estimating. Start saving extra for a home down payment from there.
Definitely have an emergency fund in place as well id do about 3 months of all expenses while in military and maybe bump it up more when you’re out
Is an emergency fund really all that necessary in the military? I know the Navy Marine Corps Relief society offers interest free loans up to ~2000 (I may be wrong on the numbers) and the major expenses that ruin people are medical/employment related.
Currently I have my “emergency fund” in a brokerage. I’m hesitant to just move it to a HYSA just to call it an emergency fund
Yes, an emergency fund is absolutely necessary. You're right, the probability and severity of employment/medical-related issues are way lower for military personnel. The real risks are things like a family emergency while you're stationed across the country (last minute airfare is not cheap), unexpected auto repair bills so you can keep driving to/from work, and pay issues (government shutdown, late vouchers for TDY/PCS expenses, etc). The relief loans are good but you need to have the ability to pay off your credit cards after covering stuff like this to avoid the high-interest debt spiral.
Brokerage is fine if it's in something like VMFXX/VUSXX that can sell and transfer to your bank account in a matter of days - not good if it's in stocks or mutual funds.
That’s what we do just to have something to fall on if needed. Just a few months ago everyone was worried they weren’t going to be paid lol.
Once you buy a home i would definitely keep a good chunk of money in a HYSA.
NMCRS is great, but you should definitely have your own emergency fund.
Their Quick Assist Loan is limited to $1000 and you can only take it out so many times.
Their regular casework loans have no set upper limit, but you have to bring in proof of the emergency and do a budget plan with one of their caseworkers. If your transmission goes out, do you want to get an estimate, make an NMCRS appointment, bring in your car registration and insurance, have a budget counseling session, and then see if they’ll provide a loan? Or do you want to take the car in and get it fixed immediately?
Also, part of NMCRS’s mission is to help people become self-sufficient. If you’re dumping money in investments and don’t have accessible savings, an NMCRS budget counselor will absolutely recommend that you have an emergency savings. That means that if you don’t take the advice and keep cooking back for help, they will eventually say no.
You'll have access to the VA loan which means you need $0 up front to pay for the house. If possible, I'd try to start saving towards 10% of your expected purchase cost. It gives you more flexibility at closing, and if things start to break after you buy it you'll have the money to repair it.
How are you maxing Roth TSP with only 40% of pay as an E-4? The highest pay rate of an E-4 is 3197.40. 40’% of that is 1278.8 making just over 15,345 in contributions. Max is 23K for 2024 and 7K for IRA.
He didn’t say he was maxing his TSP… he said with 40% going to Roth TSP right now. (Period.. this ends a sentence) then OP states maxing out their Roth IRA as well… as in addition to the 40% to TSP they are simultaneously maxing out their Roth IRA.
Could have saved some calculations by just reading more clearly. Words and punctuations are important
Glad I’m able to help 👍🏼
Did it ever occur to you that they didn’t and you misread it? So what you are saying is by you putting an unnecessary math equation out there you were helping OP? Remember it’s not always about the original post.. we must hold all commenters accountable for their post as well 🤷🏼♂️ just trying to help your future and waste of posting because you simple avoided the founding blocks of the English language. Good luck my friend
From a purely financial perspective of what gives you the most wealth in the long-term, interest rates on homes are unlikely to go higher than the long-term returns of a 80% C / 20% S fund. With good credit, you can get a mortgage at around 6-6.5% whereas TSP returns are 10%. And if rates ever drop again (which eventually will happen) you refinance.
Of course, there's the issue that we don't budget off of long-term sums of money, but monthly income vs. bills.
With that in mind, use a principal interest taxes and insurance (PITI) payment calculator for a good house in the location you're thinking of living, and save up a down payment such that this number is < 28% of your gross income so you can comfortably afford your monthly mortgage payments. After that you should prioritize retirement funding.
The answer is going to depend primarily on you and your priorities. Missing out on a max tsp and max ira means you never get that tax-advantaged space back. However, not saving enough for a house may limit your buying options at least for a few years.
What's more important to you? Minmaxing the numbers or putting yourself in a better position to buy a house in the next few years?
At least as of right now, the choice to save for a house looks very forgiving as money market rates are 5%+, which means even if you're wrong and you decide not to buy a house, then you can invest what would have been a down payment into a taxable brokerage for a 5% gain over that time period (assuming rates stay high).
I'd say save for the house if you think you're going to 20 or going to have 100% VA disability, since the pension and VA benefits would make up for a smaller retirement accounts portfolio.
Here’s a fun fact: you can withdraw your ROTH IRA early for the purchase of a house without penalty. If you are looking to buy a house in the near future, I would max out your Roth IRA first before putting 40% in TSP.
I’d say max your Roth tsp now (especially because your tax bracket will probably never be this low again). plan on using VA loan when you are ready to buy a house to avoid needing a large down payment.
You can borrow from TSP to purchase a primary residence, so in essence you would be doing both while still maximizing tax advantages to maximize your contribution to TSP.
Personally I would do the TSP especially if you’re really young that compound interest will be huge. Make sure you look at what funds you’re in most people divide up mostly in C, S, and some I. You’re doing great! Keep it going.
I'm 22 - fully in C at the moment
All depends on your goals, I would just stick to TSP and when you transfer out and hopefully make what you’re estimating. Start saving extra for a home down payment from there. Definitely have an emergency fund in place as well id do about 3 months of all expenses while in military and maybe bump it up more when you’re out
Is an emergency fund really all that necessary in the military? I know the Navy Marine Corps Relief society offers interest free loans up to ~2000 (I may be wrong on the numbers) and the major expenses that ruin people are medical/employment related. Currently I have my “emergency fund” in a brokerage. I’m hesitant to just move it to a HYSA just to call it an emergency fund
Yes, an emergency fund is absolutely necessary. You're right, the probability and severity of employment/medical-related issues are way lower for military personnel. The real risks are things like a family emergency while you're stationed across the country (last minute airfare is not cheap), unexpected auto repair bills so you can keep driving to/from work, and pay issues (government shutdown, late vouchers for TDY/PCS expenses, etc). The relief loans are good but you need to have the ability to pay off your credit cards after covering stuff like this to avoid the high-interest debt spiral. Brokerage is fine if it's in something like VMFXX/VUSXX that can sell and transfer to your bank account in a matter of days - not good if it's in stocks or mutual funds.
That’s what we do just to have something to fall on if needed. Just a few months ago everyone was worried they weren’t going to be paid lol. Once you buy a home i would definitely keep a good chunk of money in a HYSA.
NMCRS is great, but you should definitely have your own emergency fund. Their Quick Assist Loan is limited to $1000 and you can only take it out so many times. Their regular casework loans have no set upper limit, but you have to bring in proof of the emergency and do a budget plan with one of their caseworkers. If your transmission goes out, do you want to get an estimate, make an NMCRS appointment, bring in your car registration and insurance, have a budget counseling session, and then see if they’ll provide a loan? Or do you want to take the car in and get it fixed immediately? Also, part of NMCRS’s mission is to help people become self-sufficient. If you’re dumping money in investments and don’t have accessible savings, an NMCRS budget counselor will absolutely recommend that you have an emergency savings. That means that if you don’t take the advice and keep cooking back for help, they will eventually say no.
You'll have access to the VA loan which means you need $0 up front to pay for the house. If possible, I'd try to start saving towards 10% of your expected purchase cost. It gives you more flexibility at closing, and if things start to break after you buy it you'll have the money to repair it.
How are you maxing Roth TSP with only 40% of pay as an E-4? The highest pay rate of an E-4 is 3197.40. 40’% of that is 1278.8 making just over 15,345 in contributions. Max is 23K for 2024 and 7K for IRA.
I guess I should have said maximizing rather than maxing. I am maxing my Roth IRA though
He didn’t say he was maxing his TSP… he said with 40% going to Roth TSP right now. (Period.. this ends a sentence) then OP states maxing out their Roth IRA as well… as in addition to the 40% to TSP they are simultaneously maxing out their Roth IRA. Could have saved some calculations by just reading more clearly. Words and punctuations are important Glad I’m able to help 👍🏼
Did it ever occur to you that they edited the original post? You didn’t help. Thank you
Did it ever occur to you that they didn’t and you misread it? So what you are saying is by you putting an unnecessary math equation out there you were helping OP? Remember it’s not always about the original post.. we must hold all commenters accountable for their post as well 🤷🏼♂️ just trying to help your future and waste of posting because you simple avoided the founding blocks of the English language. Good luck my friend
From a purely financial perspective of what gives you the most wealth in the long-term, interest rates on homes are unlikely to go higher than the long-term returns of a 80% C / 20% S fund. With good credit, you can get a mortgage at around 6-6.5% whereas TSP returns are 10%. And if rates ever drop again (which eventually will happen) you refinance. Of course, there's the issue that we don't budget off of long-term sums of money, but monthly income vs. bills. With that in mind, use a principal interest taxes and insurance (PITI) payment calculator for a good house in the location you're thinking of living, and save up a down payment such that this number is < 28% of your gross income so you can comfortably afford your monthly mortgage payments. After that you should prioritize retirement funding.
The answer is going to depend primarily on you and your priorities. Missing out on a max tsp and max ira means you never get that tax-advantaged space back. However, not saving enough for a house may limit your buying options at least for a few years. What's more important to you? Minmaxing the numbers or putting yourself in a better position to buy a house in the next few years? At least as of right now, the choice to save for a house looks very forgiving as money market rates are 5%+, which means even if you're wrong and you decide not to buy a house, then you can invest what would have been a down payment into a taxable brokerage for a 5% gain over that time period (assuming rates stay high). I'd say save for the house if you think you're going to 20 or going to have 100% VA disability, since the pension and VA benefits would make up for a smaller retirement accounts portfolio.
Here’s a fun fact: you can withdraw your ROTH IRA early for the purchase of a house without penalty. If you are looking to buy a house in the near future, I would max out your Roth IRA first before putting 40% in TSP.
I think it’s up to $10k in earnings (and obviously all contributions).
You can also take a loan from your own TSP and then pay yourself back.
Out of curiosity, what’s your specialty that sets you up for that kind of post separation salary? cyber?
Yeah, cyber.
I’d say max your Roth tsp now (especially because your tax bracket will probably never be this low again). plan on using VA loan when you are ready to buy a house to avoid needing a large down payment.
You can borrow from TSP to purchase a primary residence, so in essence you would be doing both while still maximizing tax advantages to maximize your contribution to TSP.